If you're investing in artificial intelligence (AI) stocks, chances are you've seen some mention of Super Micro Computer (SMCI 3.18%) and SoundHound AI (SOUN 0.91%). While these aren't the biggest players in AI, they are among the most intriguing. The two companies face challenges, but they also possess a lot of possible upside.
Super Micro Computer, which is better known as Supermicro, is involved in providing businesses with AI infrastructure, data servers, and the necessary hardware they need to ramp up their AI investments and projects. Although it's up more than 40% this year (as of June 13), its low valuation suggests that it still struggles to win back the trust of investors after having a very public falling out with its auditor last year.
SoundHound AI rose to prominence last year after chipmaker Nvidia disclosed a position in the voice AI company. But with Nvidia recently selling its stake in the business and SoundHound still struggling to stay out of the red, many investors have also hit sell on this once-exiting AI stock.
Which of these two stocks makes for the better option for investors looking to generate big gains from AI? Let's break down their numbers and growth opportunities to see which one is the best stock to put into your portfolio today.
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The case for Supermicro
Supermicro provides valuable AI infrastructure that businesses need to scale their operations. It got into some trouble last year regarding its finances, including its financial auditor resigning. But the company has a new auditor and managed to meet its reporting deadlines to avoid its stock getting delisted.
Over the trailing 12 months, the company generated $21.6 billion in sales, with its profits totaling $1.2 billion. Although its margins are lean, the company was able to consistently stay in the black and grow its earnings over the years.
Investors discounted the stock heavily since the adversity and bad press it faced last year, and it now trades at just 13 times its expected future earnings (based on analyst estimates). This factors in the growth and earnings that analysts expect from the business in the year ahead, which suggests Supermicro could be a steal of a deal.
Although it has been rallying this year, it's still nowhere near its 52-week high of $101.40 and could have more room to run higher.
The case for SoundHound AI
SoundHound AI is in a great position to benefit from companies seeking out voice AI capabilities. Whether it's to enhance a driving experience or help automate and expedite the ordering process at fast-food restaurants, it possesses many growth opportunities.
Revenue in its most recent quarter, which ended on March 31, rose by 151% year over year to $29.1 million. The company got a boost from acquisitions, which have also diversified its customer base in the process. And although it remains unprofitable, its adjusted per-share loss shrank to $0.06 (compared with $0.07 in the prior-year period).
SoundHound's business is smaller than Supermicro's, and that can work to its advantage, as its market cap is just around $4 billion (versus $26 billion for Supermicro). Given the potential it has to reach many industries and the rollout of Amelia 7.0, which is a "full Agentic AI with category-leading voice technology," the company's valuation may rise significantly as it scales its operations, and since its growth is still in its very early innings.
This year, the business expects to generate between $157 million to $177 million in sales, which will be a sizable increase from the $84.7 million it reported last year.
Which stock should you go with?
If I were choosing between these two AI stocks right now, I'd go with Supermicro. I don't love its thin margins, but the business has been able to stay in the black consistently, and its low valuation does offer a good margin of safety. Its operations appear to be more stable now, and there aren't huge question marks about its reporting hanging over the business. It may be overdue for an even greater rally.
SoundHound AI is an intriguing business, and I could see it rising if it can generate good organic growth. But it's still a bit unproven, and with acquisitions muddying its recent results, it's hard to tell just how well the business is doing and if it can truly achieve profitability. SoundHound AI may have greater upside in the long run if it proves to be the real deal, but it's a far riskier option than Supermicro, which is why I'd go with the latter.
